A World Trade Organization panel ruled that India violated international trade rules when it offered excessive subsidies for the production and export of sugar and sugarcane.
India’s policies were inconsistent with WTO rules that govern the levels at which nations can subsidize domestic agricultural production, according to a decision posted Tuesday on the WTO’s website. Under WTO rules, India’s sugar subsidies are capped at a de minimis limit of 10% of the value of production.
India — the world’s largest sugar producer after Brazil — has already pledged to refrain from subsidizing sugar exports this year due to high global prices. The government previously approved a subsidy of $475 million for the 2020-2021 growing season.
India can appeal the ruling at any point in the next 60 days, a move that would act like a veto because the WTO’s appellate body is not functioning.
The panel said India violated the WTO agriculture agreement when it provided excessive non-exempt product-specific subsidies to sugarcane producers between 2014 and 2019. The WTO said India must remove its illegal subsidies within 120 days of the adoption of the report.
The dispute dates back to 2019 when Brazil, Australia and Guatemala filed parallel WTO complaints that alleged the Indian government massively increased its sugar subsidies and reintroduced a minimum price for sugar, which led to increased production of sugar that outstripped domestic demand.
The nations also contested the legality of India’s decision to assign minimum export quotas for domestic sugar mills and other export incentives that they said distorted world market prices.
During the 2018-2019 growing season, India approved dozens of federal and state-level assistance programs for the sugar industry that collectively exceeded 55 billion rupees ($730 million), Brazil said in its complaint.
The findings of the WTO panel are “completely unacceptable,” India’s commerce ministry said in a statement on Tuesday, adding its measures on sugar are consistent with its obligations under WTO agreements.
“India has initiated all measures necessary to protect its interest and file an appeal at the WTO against the report, to protect the interests of its farmers,” according to the statement.
Raw sugar futures hit a four-year high last month as supplies from Brazil were threatened by high energy prices. There are concerns that Brazilian millers may make more ethanol from their cane and less sugar at a time when crops in the country have already been hit by drought and frost.